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Hit by pandemic, China’s after-school education market embraces doing business online

Written by South China Morning Post Published on 

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The B2B segment of the total K-12 after school education market is projected to surpass RMB 100 billion by 2025, says new report

China’s K-12 after-school education market is expected to see rapid growth after the COVID-19 pandemic subsides, reaching RMB 1.4 trillion (USD 200 billion) by 2025, driven by new technology and the continued merger of offline-online educational activities, according to a new report.

With the deployment of 5G, AI and other technologies, the business-to-business (B2B) segment of the total market, comprising products and services for China’s nearly one million K-12 after-school training institutions, is projected to surpass RMB 100 billion by 2025, said a report issued on Tuesday by Oliver Wyman in collaboration with China’s National Institute of Education Sciences and the Tomorrow Advancing Life Group (TAL Group).

“The industry has been negatively impacted due to the COVID-19 outbreak, but the demand from parents and the fundamentals of the market remain unchanged. We expect the market to exceed RMB 1 trillion in a few years,” said Oliver Wyman partner Claudia Wang.

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“Additionally, nearly 70% of offline enrolled students moved online during the COVID-19 outbreak, spurring a wider awareness of distance learning,” Wang said.

China’s K-12 after-school training sector primarily includes tutoring, enrichment education, and English-language training companies. The overall market was worth about RMB 800 billion in 2019.

During the pandemic, more than 70% of these businesses said they experienced severe cash flow shortages due to a sharp drop in student enrollment, while more than 60% of business executives in the sector said they expect the negative impacts of the outbreak to continue to the end of the year, according to the study.

Nevertheless, the pandemic has been a boost for online education, with its share of the overall education market expected to reach 20% this year, up from 5% in 2019, as after-school training institutions actively seek technology to cope with the impact of the pandemic, according to the report.

In February, Chinese authorities asked schools to use online education to allow teaching and learning at home via recordings, live streaming, and cloud-based platforms. Many K-12 online education service providers, such as the TAL Group and New Oriental, have offered free access to online tools and content resources to support the after-school training institutions.

Golden age for online education sector

Tech giants have also pitched in with free tools. Tencent Holdings provided Tencent Classroom and Alibaba Group, owner of the Post, offered its DingTalk app to help schools cope with remote learning.

The online move has made edtech companies some of the biggest beneficiaries of the pandemic.

TAL Education’s chairman Zhang Bangxin, whose company is listed on NYSE, almost doubled his net worth over the past year, according to Forbes. This year was also called the “golden age” for China’s online education sector, according to a report released in March by Mergermarket. The overall online education market in China is expected to grow 12.3% to RMB 435.8 billion this year, according to iiMedia Research.

“The pandemic was an opportunity for growth and to promote the integration of new technologies in the educational scenarios,” said Li Yue, an analyst in education for research firm Analysys. “However, compared with offline education, online education also has natural disadvantages in providing an immersive experience and interactivity.”

Li said the pandemic also exposed many problems with online teaching as it was not simply a case of moving offline classrooms onto livestreaming platforms. “Some of the emerging educational products and services don’t meet the industry standards, and others find challenges in supporting large user traffic,” she said. “Quality of teaching, special curriculum design, and teaching methods are all required.”

As offline teaching gradually returns, the number of active users of online education has declined since April although it is still significantly higher than the same period last year, according to data from Analysys.

“Although the peak is over, the development of the industry will not stagnate,” said Li, who expects a merged online-offline business model to be adopted to improve the efficiency of education services.

This article was originally published in the South China Morning Post

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